Friday, October 5, 2007

Financial and Personal Privacy

As the use of the Internet extends farther and farther, more information about you becomes available on the world’s largest communications medium. Consequently, the less privacy you have. Personal privacy was once defined by property lines: your home was your castle. Today, privacy is much more a matter of your personal information, and who knows it.

Technology won’t entirely solve the problem. The Internet was designed for communicating information, not protecting it. While legitimate and responsible organizations will constantly strive to improve privacy protections for their customers and constituents, there’s bound to be somebody somewhere who can hack through any technological solution. Identity theft has become rampant.

Don’t rely on the law. The legal system is behind the times in terms of defining and protecting personal and financial privacy in the Internet Age. A sales person cannot trespass on your property and bombard you with sales pitches. But businesses can buy your personal information and use it in a variety of annoying and unwanted ways, all the while increasing the risk that your identity will be stolen. Ten or twenty years from now, the legal system may have caught up with technology and business practices, and constructed strong protection for personal information. Until then, rely more on yourself than the law.

Here are some suggestions:

1. Leave Fewer Footprints. Internet banking and payment systems may be convenient for you. But the reason they’re so prevalent is that they are convenient for banks, utilities, credit card companies, and the other organizations providing them. A large part of the financial system involves bookkeeping, and it’s cheaper to keep books with a computer than with human beings. So the banks, credit card issuers, etc. want you online. The fact that it’s more convenient for you is just a marketing ploy to make you more convenient and profitable for them. But the more your financial life is online, the larger the number of your footprints for online predators to spot and track. Every fall, numerous deer fall prey to people wearing bright orange. It’s usually the incautious deer that end up decorating someone’s wall.

2. Read the Privacy Notices. Banks and credit card companies are required by law to disclose to you their privacy practices. These disclosures are usually made in slips of paper tucked into your monthly account statements, that have an annoying habit of falling out when you open the envelope. It’s almost as if someone wants you to be so annoyed you throw the slip of paper away without reading it. Don’t throw it away. Read it. The disclosures will tell you how much access the bank will provide to others about your account records. Especially important are the disclosures concerning access by third parties. That means the bank may provide your personal information to persons outside the bank. You may have the right to object to some of these third party disclosures, such as those made for marketing purposes. Make sure you object if you don’t like them. Limit the number of organizations that have personal information about you. Reduce the spam, junk mail and marketing telephone calls you get.

3. Don’t Go For 15 Minutes of Fame. Andy Warhol wasn’t talking about something good when he referred to everyone having 15 minutes of fame. Celebrity does more to entertain the audience than elevate the subject. Splattering your entire life on the Internet facilitates identity theft. It also can limit your options. Maybe once you were a beer-swilling gearhead, but today you’re pursuing an MBA with the hope of securing a job with an investment bank. There’s nothing wrong with your ambition. This is America, and it’s the inalienable right of all Americans to re-create themselves. But those photos posted online, showing you stumbling over empty quarter barrel kegs on your way to worship the porcelain goddess, may clash with the pinstriped image you now want to project.

4. Check Your Credit Reports. You’re entitled to a free copy of your credit report once a year from the three credit reporting agencies: Experian, TransUnion and Equifax. Checking your reports doesn’t directly protect your privacy. It just tells you who’s been poking around in your records. But finding that out is the first step toward dealing with improper or unwanted access to your records.

5. Freeze Your Credit History. If you’re a resident of most states, you can freeze your credit history, and make it inaccessible to third parties except with your express permission. We’ve discussed this before at This is a very good idea, because you then control access to some of the most important of your personal information. It creates a little more work for you whenever you apply for credit (because you have to personally lift the freeze to let the potential creditor see your credit history). That can take a few days. But it’s a small price to pay for privacy.

6. Safeguard Your Paper Records. Have a locking mailbox. (A lot of identity theft today still begins with the theft from mailboxes.) Shred or at least tear up financial records you throw away. Have a home safe—you have people coming in to work on your house, clean it, repair the appliances and do a variety of other things; not all of them can necessarily be trusted. Keep the number of credit cards you have down to a minimum. Close out the credit cards you don’t use. This will reduce the quantity of paper records for someone else to steal.

Protecting your privacy takes work. But it's worth it. Repairing your credit history after your identity has been stolen is a veritable task of Sisyphus. Preventing an identity theft takes much less effort than repairing the damage from a theft.

Crime News: Using bugs as mules.

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